Madrid, Feb. 9 (Bloomberg) -- Spain's factories, farms and mines increasedproduction less than expected in December as food and clothingmanufacturers scaled back activity. Output increased a workday-adjusted 1.7 percent from a year earlier, theNational Statistics Institute said, after annual growth of 4 percent inNovember. Economists forecast adjusted production would increase 2.6percent. When not adjusted for workdays, output fell 4.4 percent. Easing economic growth in France and Germany, Spain's two largesttrading partners, is reducing demand for Spanish goods and slowingproduction in the euro zone's fourth-largest economy. The European CentralBank said yesterday expansion in the region may diminish this year in thewake of a cooling world economy, especially in the U.S. ``The whole of the euro area is already slowing and most of Spain's exportsgo to the area,'' said Nigel Anderson, economist for RBS Financial Marketsin London, before the figures were released. ``The pie isn't growing asquickly as before and the euro area's slice of it is being squeezed.'' The U.S., which absorbs some 13 percent of euro-zone exports, may seeeconomic growth slow to between 2 percent and 3 percent this year fromalmost 4 percent in 2000, according to the Organization for EconomicCooperation and Development. That compares with OECD forecasts for theeuro zone of as much as 3 percent this year -- the first time in a decadethe region would overtake the U.S.
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Spanish goods exports account for 21 percent of gross domesticproduct, with just 5 percent going to the U.S. Leading trade partners,such as Germany, rely more on exports to the world's largest economy,though, and could eventually pass through the effects of slower demandto Spain. The German economy, which absorbs about 13 percent of Spanishexports, slowed to 3.4 percent in the third quarter from 3.7 percent inthe previous three-months period, while growth in France slowed to anannual rate of 3 percent from 3.4 percent in the same period. France,the region's second-largest economy after Germany, buys 20 percent ofSpanish exports. Together with Portugal and Italy, the euro region's two largesteconomies account for 50 percent of Spanish exports. ``Spain will feel the slowdown in the U.S. economy, but more as asecondary effect via its trading partners,'' said Edita Pereira, economistat Analistas Financieras Internacionales. Manufacturers in Spain are getting a helping hand from local consumersand businesses. With unemployment falling and interest rates stillrelatively low, they continue to buy more.